Not long after he became CEO at Sears, Arthur Martinez was on the outskirts of Indianapolis, touring one of the bigger stores in his chain. The lighting was dull. The displays looked cramped, except one towering rack that Martinez scornfully dubbed Mount Munsingwear.
But not until he walked through the lingerie department did Martinez grasp how big a job it would be to modernize the moribund retailer. There, amid the frilly women’s intimates, was . . . the men’s room. Martinez halted, speechless, and watched women shoppers look away as embarrassed men tried to find a path through the teddies and camisoles.
Last week was Martinez’s last as CEO of Sears, Roebuck & Co. He and the company’s directors agreed it was time for him to retire. To read the last year’s news clips, you could conclude Sears is much the same lumbering mastodon it was when Martinez arrived from Saks Fifth Avenue in 1992. True, his bold ventures in furniture and auto parts didn’t pan out. Growth is sluggish and–most damning of all in the flinty eye of Wall Street–Sears’ stock price is barely half of its 1998 peak.
But the downbeat verdict is unfair. Martinez did the remarkable. What he couldn’t do is make it last.
Almost no one expected the career bean counter to succeed at Sears; early on, a Wall Street Journal profile sniffed that “Mr. Martinez is no merchant.” Yet he quickly revived the chain. He cut employment and closed stores, two painful but necessary moves. He killed off the Sears catalog, mourned by more people than ever ordered from it. More important, Martinez rooted out a corporate culture that valued seniority over performance. The cumulative effect was stark: Through the mid-1990s, profits leaped 20 percent a year.
That’s when Sears suffered its greatest crisis ever. Prodded by a federal judge in Boston, Sears admitted in 1997 that its credit department had, for a decade, illegally collected payments from almost 200,000 customers whose debts had already been wiped clean in bankruptcy court. Martinez insisted that the company cooperate with the Justice Department, whose investigators concluded that he hadn’t known about the bad practice.
The scandal tarnished over a century of customer trust in Sears and derailed the company’s momentum. As Sears stumbled, competitors made inroads. Under Martinez, Sears never fully recovered from those two blows. It’s up to his successor, Alan Lacy, to deliver the “second revolution” that Martinez couldn’t execute.
Still, when Martinez arrived, the issue was survival. He’s leaving behind a $40 billion company that, despite some problems, has made record profits in the last three quarters; Prudential Securities expects earnings per share this year to be triple what they were in 1993.
Sears may no longer be hot, but it’s far more solid than the company Martinez inherited. So here’s the real bottom line: Martinez should be remembered for what he did pull off–not what he didn’t.
